|Issue:||Europe I 2011|
|Topic:||Monetising the cloud|
|Title:||Vice President of Products|
Liam Maxwell is Vice President of Products for Oracle Communications, responsible for product development and strategy for the Communications and Media industries. Mr Maxwell joined Oracle via its acquisition of Portal Software where he last served as Chief Product Officer. Prior to this, Mr Maxwell held management positions with Aerial Communications and Computer Sciences Corporation. Liam Maxwell graduated from Illinois State University with a Bachelor of Science degree in Business Administration and Information Systems.
Cloud computing is an evolutionary next-step, a major improvement in how we use technology to achieve business objectives and accelerate return on investments (ROI). Cloud computing is a combination of technologies that have been brought together to provide flexibility, streamlined business processes and enhanced, more efficient, architectures. However, it also brings challenges to the fore in areas such as security, integrity and cost apportionment. Communication Service Providers (CSPs) are in an ideal position to effectively monetise cloud services through service differentiation.
What is cloud computing? Cloud computing is Internet-based computing, where shared resources, software and information are provided to computers and other devices on demand. It is not a technology revolution, but rather an evolution, which has huge potential value when viewed in this context; and one that allows existing investments to be maximised. As a phenomenon, cloud computing continues to experience significant growth, both in terms of people’s awareness of it, and its implementation. For CSPs (communications service providers), the commercial potential of providing a public cloud to customers is significant. However, as well as providing a great opportunity to create new revenue streams, CSPs need to know that the cloud also has the potential to impact existing revenue streams and services. Generating revenue from the cloud With cloud computing appearing on the front page of The Economist and household names such as Google and Amazon already providing cloud services, cloud computing is quickly becoming mainstream. It is also now firmly on the agenda at many corporate board meetings. As a result, CSPs, Internet players, systems integrators and technology vendors are all striving to become cloud providers and ensure their place at the table. This dash to secure a slice of the revenue means that swift action is essential for those who wish to succeed in the race to provision and successfully monetise the cloud model. For years, CSPs have been using elements which can be viewed as cloud technologies, such as virtualisation and scalable storage. However, in order to achieve scale and reap the benefits cloud has to offer, CSPs should look to deploy clouds in their own operations as a test bed for the technology. CSPs have a critical differentiator when it comes to cloud computing, which is the network itself providing the connection fabric that links the ‘cloud’ element together. By positioning themselves at the heart of the cloud and getting business end-users to operate through the cloud, they will greatly increase their network traffic and transport revenues. The first two revenue-generating opportunities open to CSPs are derived from this function. By selling networking capabilities as a service to enterprises, CSPs can charge for a given level of connection quality to a cloud provider. Similarly, CSPs can also charge cloud-based providers for delivering agreed levels of network service quality. The third revenue-generating stream is more complicated; however, the ROI is much greater when CSPs are offering IT resources directly to customers and become cloud service providers themselves. Verizon and Orange Business Services are examples of global operators who already offer their own cloud services to businesses. In addition, CSPs are uniquely placed to understand which industries are not using the cloud and identify opportunities to generate new revenue. For example, CSPs are already developing a wide range of offers across segments such as: utility hosting; providing development environments for third parties to test application programming interfaces; enterprise ecosystems; desktop service creation; and digital content creation – all of which are well beyond their core communication services and network connectivity. Business benefits of the cloud Cloud computing delivers real business benefits that are easily measurable including cost reduction, increased efficiencies and systems and platform rationalisation. Cost reduction is a significant factor; businesses can significantly benefit from the economies of scale and low cost of ownership offered by the cloud. In addition, reduced costs associated with real estate and utilities such as electricity and air conditioning can also greatly reduce an organisation’s overall operational and capital expenditures. Efficient delivery of services is another benefit. Providing businesses with access to resources through an on-demand infrastructure means that they can turn on and off specific systems and services as and when required. Consequently, the cloud gives users greater choice and flexibility. As such, the CSP public cloud model means that businesses can have on-demand access to a powerful set of systems and applications, which they may not have been previously able to afford, and only pay for the services and time they use. By using a CSP public cloud, businesses can eliminate the cost of keeping duplicate – often underutilised – IT architectures and systems in place. Many businesses have numerous servers, which never run at capacity while others are often over worked. By utilising a CSP public cloud model, businesses can rationalise their systems and platforms and remove these inefficiencies and their associated costs. The cloud also enables superior customer interaction. Having customer information in a single place can greatly enhance a business’s knowledge of its customer base. By providing a 360-degree view of customers, businesses can deliver faster, more responsive services across every channel from the call centre to the social web. In addition, by linking up different functions from across the business, such as sales, marketing and CRM, they can gear themselves around the single view of the customer and work in conjunction with other areas of the business, rather than working in isolation. Successful cloud transformations Before CSPs can monetise the cloud, however, they need to capitalise the business transformation programmes they have already undertaken to make sure that the investment in these programmes isn’t wasted. For the most part, the business transformations already underway in CSPs are ‘cloud-friendly’, however much needs to be done to ensure that everything runs smoothly once implementation is complete. When a CSP undertakes a business transformation they need to take a number of aspects into account to make sure it is a success. CSPs need to ensure that they have the right strategy in place, with clear organisational direction and directly aligned IT support. Systems are also crucial in the transformation process as the right infrastructure is necessary to support new business and customer-driven processes. Equally, innovative use of new technologies is required to establish competitive advantages in terms of cost reduction through economies of scale, rationalisation of IT and scalability. Once the cloud is in place, as with any system, CSPs need to ensure that they have the right people running it. Cloud implementations can often have a significant impact on organisational structure and this needs to be addressed and aligned to suit the needs of the business. Finally, there is the need to ensure that the correct policies and processes are in place to govern the cloud and the need to ensure that the interfaces are seamless in order to facilitate their use by businesses and key constituents, and to make sure that everyone is able to use the new cloud model. There is a real opportunity for CSPs to monetise the cloud by providing services to business. However, if they are to succeed, they need to act quickly to ensure they do not miss out to emerging competitors like Amazon and Google who have already started winning mind share with potential cloud customers. The legitimacy of CSPs in cloud provisioning is not in question. In fact, given that they provide the fabric that binds cloud computing together, they have a very good case to put themselves forward as cloud providers for businesses. Presently, however, CSPs are not doing this, and an emerging market that they are well positioned to capitalise on could slip through their collective fingers. CSPs need to they might lose, such as voice, if they do not. If this happens and CSPs don’t rise to the challenge they will face difficult questions from stakeholders when traditional revenue streams start to dry up or disappear. CSPs can play a very important role in the cloud. The combined CSP/cloud offering can be very enticing for businesses looking for a mix of elasticity, flexibility and fast access to services, on demand. However, to take advantage of this opportunity, CSPs need to start their cloud transformations now to ensure that they do not lose out on revenue to competitors in the not so distant future.